Estee Lauder Companies Inc (EL)

Conclusion

Estée Lauder Companies Inc sells skin care, makeup, fragrance and hair care under brands including La Mer, Estée Lauder, Clinique, M·A·C and Jo Malone London. At 113.16 USD on 2026-11-09, its market capitalisation is 28.0 billion USD and its enterprise value is 34.0 billion USD.

The verdict is fair. Today's P/E of 76.2 is above its ten-year median of 46.0, but EV/EBITDA of 18.2 is below its median of 25.4, and P/FCF of 18.5 is below its median of 41.2. The DCF gives 60.72 USD per share at a discount rate of 11.05%, while the fair value from historical multiples is 171.02 USD. The fair value band runs from 92.69 to 139.04 USD with a midpoint of 115.87 USD, giving a margin of safety of 2.4%. The reverse DCF implies revenue growth of 11.6% a year, against a five-year revenue CAGR of -1.5% and a five-year free cash flow per share CAGR of -15.0%.

What holds the case up is cash generation: free cash flow conversion of 412.2% on a trailing basis, a Piotroski score of 7 out of 9, and eight beats in eight quarters. What would break it is returns below the cost of capital, with ROIC of 7.0% against a WACC of 9.1%, net debt to EBITDA of 3.2, and revenue that has declined over five years.

Financial health

Financial strength is yellow: the current ratio of 1.25 is good, while net debt to EBITDA of 3.2 and interest coverage of 3.3 are both on watch. The quick ratio is 0.82 and debt to equity is 2.28. The Altman Z-score is 2.90, in the grey zone. The Altman model was designed for manufacturers, so this reading is indicative only for a branded consumer goods company. Insolvency risk: low, about 1.6% by the estimate of the Ohlson model over one to two years. Debt is the main constraint on the company's financial flexibility.

Earnings quality

Earnings quality is green, with all three assessed signals rated good. Free cash flow conversion is 412.2% on a trailing basis and 136.5% over five years, and the accrual ratio is -8.0%, so cash flow exceeds reported earnings. Stock-based compensation is 1.9% of revenue, and free cash flow after it is 1.23 billion USD. The share count has fallen at a five-year compound rate of -0.2%. The Piotroski score is 7 out of 9, and the Beneish M-score is not available. The company beat estimates in all 8 of the last quarters, with an average surprise of 49.7%. Current-year estimates rose 7.5% over 90 days, with 7 upward and 5 downward revisions in the last 30 days. Next year's EPS estimate implies growth of 18.5%.

Profitability

Profitability is yellow. ROIC of 7.0% sits below the WACC of 9.1%, a gap of -2.1% in the company's own measure, so the business is not currently earning its cost of capital. Its five-year median ROIC is 6.4%. Gross margin of 76.0% is close to its ten-year median of 75.6%. Operating margin of 11.9% compares with a median of 12.8%, and net margin of 2.4% compares with a median of 7.2%. Operating margin stability is 37.5%. The DuPont split shows a net margin of 1.2%, an asset turnover of 0.76 and an equity multiplier of 5.19. Return on equity of 9.1% therefore relies heavily on leverage.

Growth

Growth is red. Revenue compound growth is -1.8% over three years, -1.5% over five years and 2.9% over ten years, and revenue grew in 6 of the 10 comparable years. EPS compound growth is -43.6% over three years, -42.3% over five years and -16.3% over ten years. The only positive signal is the next-year EPS estimate, which implies growth of 18.5%. That forecast is a sharp reversal from the recent record and depends on a turnaround that the reported figures do not yet show.

Valuation

Valuation is yellow, with one neutral signal. Against their ten-year medians, the P/E of 76.2 is a premium of 65.8%, while EV/EBITDA of 18.2 is a discount of 28.3%, P/FCF of 18.5 a discount of 55.1%, P/S of 1.8 a discount of 49.6% and P/B of 6.9 a discount of 33.8%. The DCF gives 60.72 USD per share at a discount rate of 11.05%, and 45.2% of its value sits in the terminal value. The reverse DCF implies 11.6% growth, against revenue growth of -1.5% and free cash flow per share growth of -15.0% over five years. The fair value band is built on fixed assumptions, not a price target. The dividend yield is 1.8%, the forward yield 1.3%, and the payout on free cash flow 33.4%.

Risks

The main risk is the return gap: ROIC of 7.0% against a WACC of 9.1% means growth adds less value than the capital it consumes. Net debt to EBITDA of 3.2 and interest coverage of 3.3 leave limited room if earnings fall further. Five-year revenue and EPS declines would need to reverse for the reverse DCF's 11.6% implied growth to be credible. The Beneish M-score is not available. The analysis has no debt maturity schedule and no revenue breakdown by segment or region, so refinancing timing and the source of growth cannot be checked. The Altman Z-score does not fit a consumer goods company well. The fair value band and the DCF rest on fixed assumptions, including a 5% equity risk premium and capped growth.